Department of Management Science
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Item Impact of Board Interlocking into Voluntary Disclosure: Moderating Roles of Board Independence, Institutional Ownership, and Family Ownership(Library Information Services, COMSATS University Islamabad, Lahore Campus, 2024) Remsha Shahzady; CIIT/SP21-RBA-102/LHR; Dr. Samya Tahir; LHR TP 9593The research examines the relationship between Board Interlocking (B_Int) and Voluntary Disclosure (VD) practices within firms listed on Stock Exchange Pakistan (PSX). The study further investigates the moderating roles of Board Independence (B_Ind), institutional Ownership (Inst_Own), and Family Ownership (Fam_Own) on the relationship between B_Int and VD. B_Int where members of one company sit on other boards. This research examines how B_Int negatively affects how much information companies voluntarily disclose to the public. This happen when companies become more secretive and board members prioritize protecting their networks over transparency. It also examines how factors like B_Ind, Inst_Own, and Fam_Own influence this negative relationship. This negative impact of B_Int on VD is lessened when boards have more B_Ind. B_Ind does not have strong personal ties with company and not involve in company’s management. They encourage unbiased decision-making for all shareholders. They encourage openness and accountability. Higher level of Inst_Own help to reduce the negative effect of B_Int on VD. Inst_Own represents the percentage of company’s share owned by large organizations. They invest on the behalf of their clients and influence company’s decisions due to the size of their holdings. Their presence pushes companies to disclose more information. Fam_Own boost the negative impact of B_Int on VD. In Fam_Own families hold significant shares and influence company’s decision and management. Family controlled companies are more inclined to keep information private and reduce overall transparency. This study uses agency theory and legitimacy theory to explain how B_Int affects VD. Agency theory explains B_Int help to align interests between shareholders and management. Legitimacy theory helps to understand that companies seek to gain and maintain approval from society and stakeholders. By showing transparency and sharing information companies build trust. Companies ensure that their actions are seen as acceptable and legitimate. This research will use Regression Analysis method to measure the impact of B_Int on VD and the moderating variables B_Ind, Inst_Own, and Fam_Own. Regression model quantitatively assess the relationship between these variables. This model will help to understand how these variables positively or negatively influence VD practices. And data will be collected from annual reports available on PSX.Item The Relationship Between Corporate Governance and Firm Value: Role of Discretionary Earnings Management(Library Information Services, COMSATS University Islamabad, Lahore Campus, 2018) Sajid Nazir; FA10-PMS-001; Dr. Talat Afza; LHR TP 5287Corporate governance practices help in enhancing firm value by effectively monitoring the managerial decisions as well as reducing the level of information asymmetry and agency problem between empowered managers and dispersed minority shareholders. The present study investigates the relationship between corporate governance and firm value for the developing economy of Pakistan. The study has also taken into consideration the moderating role of discretionary earnings management in corporate governance-firm value relationship, which is considered to be a relatively ignored research issue in corporate finance literature. In addition to focusing on individual mechanisms of corporate governance (i.e. audit, board, compensation, ownership), the present study has also constructed a composite corporate governance index to investigate the role of effective corporate governance in mitigating earnings management and enhancing firm value. The data of 208 firms listed at Karachi Stock Exchange for a time period of 2004 2011 has been used for analysis and accounting, market and economic measures of performance have been used as firm value. The study finds that corporate governance plays a vital role in enhancing firm value in long as well as short run. Constitution of internal audit committees as an effective internal audit system is essential for the enriched progress of a firm. The monetary incentives and compensation paid to the top executives motivates them to work in the best interests of the company which increases not only short term accounting value of firm but also long term market and economic value. The findings reveal that discretionary earnings management practices by corporate managers damage the firm value in long term and it could be mitigated by effective corporate governance mechanisms. Moreover, this value damaging role of discretionary earnings management negatively moderates between effective corporate governance and firm value. Firms with earnings manipulation weakens the impact of effectiveness of governance system and leads to lower firm value. Finally, the study suggests some practical implications based upon the findings for investors, policy makers and manager.Item Impact Of Corporate Governance On Capital Stractur(Library Information Services, COMSATS University Islamabad, Lahore Campus, 2017) Aisha Javaid; FA15-RMS-014; Dr Sajid Nazir; LHR TP 4759This study contributes to the existing literature of capital structure by extending the empirical work on the established relationship between the corporate governance and capital structure by analyzing the mediating role of cost of capital. Using five major attributes of corporate governance i.e. board size, board composition, CEO/Chairman duality, managerial ownership and institutional ownership as explanatory variables and weighted average cost of capital as mediator, we attempt to analyze the implication of good governance practices on the effectiveness and value relevance of capital structure decisions. However, debt to asset ratio was used to measure the leverage ratio of the firm considered as the dependent variable of the present study. The sample for this study is 76 non-financial firms listed on the Pakistan Stock Exchange (formerly Karachi Stock Exchange) for the period of 2004-2015. The analysis of present study has been disintegrated at four levels. Firstly, we have studied the relationship between corporate governance and capital structure, secondly, the relationship between corporate governance and cost of capital, thirdly, the relationship between cost of capital and capital structure and lastly, the indirect effect of cost of capital in the existing relationship between corporate governance and capital structure as the mediator. As the data is cross sectional-time series, pooled and panel data analysis techniques (i.e. fixed effect and random effect) are used for inferential purposes, after performing regression diagnostics tests such as linearity, normality and heteroskedasticity. In order to choose between fixed and random effect model results, Hausman test was performed which is the indication of appropriateness of obtained results for interpretation. Our findings provide evidence for the explanatory power of corporate governance and the partial mediating role of cost of capital in determining the optimal capital structure. Additionally, we concluded that board composition, CEO/Chair duality and managerial ownership are significant in determining the capital structure decisions of the firm while, institutional ownership and board size are not significant in the financing decisions of the firm. Moreover, some ix conventional determinants of capital structure including tangibility and return on assets are also significant in deciding the optimal financial mix of the non-financial firms of Pakistan stock exchange.Item CEO Power and Systemic in Banks: Role of Corporate Governance and Risk Governance Mechanisms(Library Information Services COMSATS University Islamabad Lahore Campus, 2023-02-09) Tabraiz Khalid; SP22-RMS-001; Dr. Ammar Abid; LHR TP 8765The study investigates the impact of CEO Duality, CG (corporate governance) and RG (risk governance) mechanisms on the systemic risk along with investigating the moderating role of CG and RG on the relationship between CEO power and systemic risk by using a sample of 88 large listed commercial banks from 11 Asian countries namely Pakistan, China, India, Bangladesh, Bahrain, Jordan, Philippines, Saudi Arabia, Turkey, Thailand and UAE. The study utilizes OLS (ordinary least square), random effect and fixed effect models and evidences the negative influence of CEO Power, CG and RG mechanisms on the systemic risk, only a few positively influencing the systemic risk such as CRO Presence and RMC (Risk management Committee) meetings. The findings show that a few CG and RG mechanisms significantly moderate the relationship between CEO power and systemic risk such as board size, RMC meetings, CRO (chief risk officer) presence. The influence of CEO power, CG and RG mechanisms is also investigated using the GMM approach to tackle endogeneity issues. The results of OLS, random effect, fixed effect are consistent with the GMM. Moreover, the moderation results of CG and RG mechanisms on the relationship between CEO power and systemic risk are also improved. CG mechanisms board size, board independence and board meetings significantly moderate the relationship between CEO power and systemic risk. RG mechanisms RMC presence, RMC size, CRO presence and CRO independence also significantly moderate the relationship between CEO power and systemic risk.Item Impact of Corporate Governance on Risk Management and Financial Performance: Evidence from SAARC Region(Library Information Services, COMSATS University Islamabad, Lahore Campus, 2023) Noreena Ilyas; FA19-RMS-019; Dr. Waheed AkhterThe importance of corporate governance has grown in South Asian countries due to the rising demand for cash and other financial resources from businesses. A risk management committee may be formed, and bank performance can be sustained through good corporate governance, administering an organization following the laws and regulations. This study aims to explore the relationship between corporate governance, risk management, and financial efficiency in both Islamic and traditional banks. With the growing interest in the financial performance of banks, it is important to understand the impact of these factors on the overall efficiency of banks. The study analyzed the influence of corporate governance and risk management on the performance of both Islamic and conventional banks, taking into account bank size as control variable. Good corporate governance practices can improve the risk management of banks and enhance their overall financial performance. Risk management is another important factor that affects the financial performance of banks. Effective risk management practices help banks to identify, assess, and manage potential risks that can impact their financial performance. This study will provide the deep insight of the impact of corporate governance and risk management on the financial performance of banks in SAARC region by taking the data of Islamic and conventional banks from seven countries. Fixed effect regression analysis will be used to find the results. Finally, the study provides recommendations for regulators and policy makers on ways to improve the financial efficiency of banks by increasing their size and internal governance. The findings of the study will be useful for policymakers, regulators, and banks in developing strategies to improve the financial performance of banks, and to promote the stability and prosperity of the banking sectorItem The Effects of Corporate Governance, Voluntary Disclosures and Information Asymmetry on Agency Cost: A Moderated Mediation Examinatio(Library Information Services, COMSATS University Islamabad, Lahore Campus, 2021) Samya Tahir; FA13-PMS-015; Dr. Sajid Nazir; LHR TP 7860In light of many financial scandals during the last four decades (e.g., Enron, Parmalat, and Crescent Standard Investment Bank Limited), companies are paying more attention to resolve management's opportunistic behaviors in the form of fund expropriation, empire building, and suboptimal investments. Managers are presumed to possess additional information on a firm’s current performance and future prospects, which leads to increase information asymmetry and agency costs. Therefore, the implementation of an appropriate system of corporate governance to reduce information asymmetry constrains agents from behaving opportunistically and, as a result, reduces agency costs. Moreover, effective voluntary disclosures play an additional role in monitoring managerial activities by providing more transparency and understanding to investors and creditors about the company. Based on these arguments, this study aims to investigate the fundamental role that information asymmetry plays as a mediator in the relationship between corporate governance and agency cost. The study further evaluates the role of voluntary disclosures in moderating the mediated relationship between corporate governance and agency cost through information asymmetry. The sample of the study is selected from the non-financial firms (listed on the Pakistan Stock Exchange) during the period from 2009 to 2015. The moderated mediation is applied using PROCESS Macro to construct bootstrap confidence intervals at the 95% level to estimate the model and a “simple slope analysis” to visualize the model. The direct relationship shows that despite increasing corporate governance mechanisms, the agency cost of overinvestment is rising. However, the indirect relationship suggests that the corporate governance mechanism promotes transparency by exerting pressure on management to produce information that investors and other stakeholders can use. This creates a monitoring channel that reduces information asymmetry, thus reducing the ability of management and majority shareholders to expropriate the firm’s resources, which mitigates the overinvestment of free cash flow. The positive effect of corporate governance on agency cost in the direct relationship becomes negative in the indirect relationship, xi contingent on increased voluntary disclosures by means of an additional controlling mechanism that mitigates the agency cost. Additionally, a high level (vs. low) of voluntary disclosure index and sub-indices are better able to negatively moderate the mediated relationship. The results support the agency cost hypothesis that states that managers and dominant shareholders make suboptimal investments when disclosure quality is reduced. Despite the efforts of academia, professionals, and regulatory bodies, the disclosure of value relevant information is limited. The insights provide implications for the Pakistan Institute of Corporate Governance to ensure the effective execution of the governance rules. Likewise, it is important to set voluntary reporting standards in response to calls for additional control devices (i.e., voluntary disclosures).Item Impact of Shareholders’ Activism on Governance Practices and Firm Performance in Pakistan: A Response for Family Controlled Firms(Library Informtion services, CUI Lahore, 2019) Ayesha Amjad; CIIT/FA17-RMS-008/LHR; Dr. Sajid Nazir; LHR TP 5696This study has set out to empirically examine the impact of one of the monitoring mechanism of corporate governance on the overall performance of the firm. Call of previous researches stimulate this study to respond by taking sample of 150 nonfinancial firms listed on PSX to investigate impact of ownership structure on performance of the firms while taking into account multiple dimensions. The study has taken firm performance as it dependent variable which is measured through two proxies: Return on Assets and Tobin’s Q. The independent variable of the study is Ownership Structure of corporate governance measured through five proxies: Institutional Ownership, Family Ownership, Family Control, Group Affiliation and Institutional Activism. The study has employed System GMM econometric technique to investigate the relationship. According to computed results, Family Ownership puts positive and highly significant impact on market performance of the firm. Similarly, there exists strong and significant relation among Family Control and market value of firm. There is highly significant association among Group Affiliation (GA) and market performance of the firm but in negative direction. Similarly, Institutional Ownership (IOS) is significantly related to accounting and market performance of the firm. Moreover, joint impact of Institutional and Family Ownership (IOSxFOS) is positively and significantly related to accounting performance of the firm. Finally, Institutional Activism (Inst_Act)is positively and significantly related to accounting performance of firm.Item Corporate Governance, Financial Constraints and Dividend Policy: Evidence from Pakistan(Library Information Services, COMSATS University Islamabad, Lahore Campus, 2018) Muhammad Azeem; FA11-PMS-002; Dr. Talat Afza; LHR TP 5327Information asymmetry between insiders and outsiders creates various issues for a firm, such as the agency problem where managers pursue their own interests even at the cost of the wellbeing of the firm’s shareholders and probable external financial constraints where external investors discount risk by causing a surge in the cost of financing. Normally, a firm manages the issues of the agency problem and external financing constraints by omitting or initiating dividend payments. In most existing studies, scholars have focused on the direct relationship between corporate governance and dividend policies and, thus far, they have produced inconclusive and contradictory results. Most probably, these studies have not considered the role of financial constraints in dividend payment decisions. Moreover, the substantial emergence of corporate scams, along with weak regulatory environments coupled with the underdevelopment of the financial sector of Pakistan, has encouraged the study of the aforesaid tradeoff. Therefore, this study investigated the impact of corporate governance on dividend policies in the presence of financial constraints using a sample of 139 non-financial firms listed in the KSE in Pakistan, where a weak regulatory framework generates agency problems and the underdevelopment of financial sector causes financing constraints for businesses. The results reveal that, in Pakistan, dividends are an Outcome of governance practices. As the quality of firm-level governance improves, shareholders are provided with the legal strength to ultimately force firm managersto pay dividends.Along with the agency problem, the availability of external financing is an important factor related to dividend payment decisions in Pakistan. When a company is confronted with the agency problem and financial constraints simultaneously, managers try to avoid costly external financing rather than reducing agency problem. The corporate regulatory machinery of Pakistan completely inherits the characteristics of low efficiency, and as a result, the issue of unsymmetrical firm-level governance practices has emerged. Eventually, the influence of financial constraints on dividend policies also varies across different corporate governance regimes.Item Impact of Corporate Governance on Firm Performance: A Case of Insurance Industry of Pakistan(Library Information Services, COMSATS University Islamabad, Lahore Campus, 2014) Hafiz Muhammad Raheel Arif; FA11-MSMS-013; Dr. Talat Azfa; LHR TP 4385The study is aimed to investigate the outcome of the influence of corporate governance on financial performance of two-tiered insurance industry of Pakistan i.e. Non-life insurance companies and life insurance companies for the period 2005-2012. The study has used four dimensions of corporate governance mechanisms including board composition, board compensation, ownership structure, and audit quality. The study uses twelve corporate governance variables which are categorized under three categories making corporate governance indices which are; corporate governance index of board structure, corporate governance index of ownership structure, and corporate governance index of audit quality. Each category includes variables (i) corporate governance board index, (a) board size, (b) board independence, (c) chief executive officer duality, (d) board diversity, and (e) executive remuneration, (ii) corporate governance ownership index, (a) institutional ownership, (b) ownership concentration, and (c) family ownership, (iii) corporate governance audit index, (a) audit committee size, (b) audit fees, (c) audit committee independence, and (d) independence of audit committee chairman and a set of control variables including premiums growth, liquidity, firm size for both life and non-life insurance companies and firm age for non-life and leverage for life insurance companies. Both accounting and marketing measures are used as financial performance variables viz. return on assets, return on equity as accounting measures, and Tobin’s Q as marketing measure of financial performance. The study separately gives the results of the non-life and life insurance companies while making a comparison between the both. Findings of the study insinuate that index of board structure and index of audit has positive and significant relationship with the both type of financial performance variables of non-life and life insurance companies, governance index of ownership structure has negative effect with all performance measures. While in control variables, size, age and liquidity has positive and premiums growth has negative effect on financial performance variables of non-life insurance companies. And leverage and liquidity of life insurance firms have negative effect with all three performance variables; firm size has positive with return on assets and return on equity but negative with Tobin’s Q and premiums growth has negative association with return on assets and return on equity but positive with Tobin’s Q. The study concludes that return on assets and return on equity are the most suitable variables of measuring financial performance.Item The Relationship Between Corporate Governance and Firm Value: Role of Discretionary Earnings Management(Library Information Services COMSATS University Islamaabad Lahore Campus, 2015) Sajid Nazir; FA10-PMS-001; Dr. Talat Afza; LHR TP 5287Corporate governance practices help in enhancing firm value by effectively monitoring the managerial decisions as well as reducing the level of information asymmetry and agency problem between empowered managers and dispersed minority shareholders. The present study investigates the relationship between corporate governance and firm value for the developing economy of Pakistan. The study has also taken into consideration the moderating role of discretionary earnings management in corporate governance-firm value relationship, which is considered to be a relatively ignored research issue in corporate finance literature. In addition to focusing on individual mechanisms of corporate governance (i.e. audit, board, compensation, ownership), the present study has also constructed a composite corporate governance index to investigate the role of effective corporate governance in mitigating earnings management and enhancing firm value. The data of 208 firms listed at Karachi Stock Exchange for a time period of 2004 2011 has been used for analysis and accounting, market and economic measures of performance have been used as firm value. The study finds that corporate governance plays a vital role in enhancing firm value in long as well as short run. Constitution of internal audit committees as an effective internal audit system is essential for the enriched progress of a firm. The monetary incentives and compensation paid to the top executives motivates them to work in the best interests of the company which increases not only short term accounting value of firm but also long term market and economic value. The findings reveal that discretionary earnings management practices by corporate managers damage the firm value in long term and it could be mitigated by effective corporate governance mechanisms. Moreover, this value damaging role of discretionary earnings management negatively moderates between effective corporate governance and firm value. Firms with earnings manipulation weakens the impact of effectiveness of governance system and leads to lower firm value. Finally, the study suggests some practical implications based upon the findings for investors, policy makers and manager.